Why Is Occidental Petroleum (OXY) Stock in the Spotlight Today?

  • Berkshire Hathaway (BRK-A, BRK-B) just received approval to acquire up to 50% of outstanding Occidental Petroleum (OXY) stock.
  • However, Berkshire CEO Warren Buffett isn’t expected to bid for full control of the oil and gas company.
  • OXY stock is currently down 3% in the wake of these developments.
Production operator communicate between central control room by using radio to operate ball valve at offshore oil and gas processing platform for control gases and liquid crude oil process.
Source: Oil and Gas Photographer / Shutterstock.com

Occidental Petroleum (NYSE:OXY) stock has seen strong interest from Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) lately. Just this past week, U.S. regulators approved Berkshire to purchase up to 50% of outstanding OXY stock. However, this news doesn’t mean that Buffett and his company plan to take over Occidental Petroleum completely.

This company was once the target of what might be called “bankruptcy meme traders.” Now that energy prices are high, though, Occidental might actually be viewed as a potentially thriving, high-conviction business.

Or at least, Buffett and Berkshire seem to view the company this way. Not long ago, Berkshire Hathaway requested permission from the Federal Energy Regulatory Commission to purchase up to 50% of Occidental’s outstanding shares.

On Friday, the Commission granted this permission. Public filings indicate that Berkshire Hathaway had already held 20% of OXY stock as well. So, since many people follow Buffett’s moves, it’s not too surprising that OXY moved higher on Friday.

OXY Stock Falls as Takeover Isn’t Imminent

Perhaps some traders had assumed or hoped that Berkshire Hathaway would completely buy out Occidental Petroleum in the near future. However, assumptions and unfounded hopes can lead to financial losses.

OXY stock is coughing up some of Friday’s gains, currently down 3% and falling as much as 5% in early trading. This decline is likely due to a recent report from The Wall Street Journal. Evidently, Buffett’s plan to buy up to 50% of Occidental’s shares didn’t necessarily mean a full takeover would happen anytime soon.

Citing individuals close to the matter, WSJ reports that Buffett “hasn’t informed Occidental of any plans to acquire a controlling stake in the company.” The outlet elaborates:

“Given Mr. Buffett’s well-known aversion to hostile deal making, it would be out of character for him to make a bid without sounding out the company’s executives and directors first.”

Buffett is cautious and methodical about potential takeovers. That means OXY stock traders shouldn’t jump to any conclusions, although some undoubtedly already did on Friday. Unfortunately for those investors, they’re now paying for their haste today.

On the date of publication, David Moadel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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